He begins his article, "The outlook for the top U. S. banks is brightening, but Wells Fargo (WFC - Get Report) is being left behind."

In the aftermath of the financial services crisis, Wells Fargo emerged with arguably the soundest reputation among the country's major banks. But a scandal last year involving the creation of fraudulent credit card and deposit accounts led to the payment of $185 billion in fines to the city of Los Angeles and federal agencies, tainting the bank's reputation.

In October, Wells Fargo's Chief Executive John Stumpf resigned. He had held his position for nine years, and his departure underscored a culture gone awry.

Wells Fargo critics have said that the bank's management team had become complacent, creating an environment in which middle managers and bankers at the branch level felt pressure to increase sales.

Corporate culture matters. Chief executives set and promote their companies' culture in terms of not just what they say but also how they behave.

In this respect, Wells Fargo has been sliding for years.

Wells Fargo successfully navigated the Great Recession by focusing on its mortgage lending business and maintaining a conservative, steady course for all its activities. The bank did an excellent job of controlling its expenses during and immediately following the financial crisis.

Still, there were problems brewing. The bank's return on equity (ROE) peaked in 2013 at 12.9% and then began to decline as other major banks experienced rising levels of return.

In the fourth quarter, the bank's return on shareholder's equity was 10.9%, down from 11.9% a year earlier. JPMorgan Chase (JPM - Get Report) , for the first time in years, posted a fourth-quarter ROE in the fourth quarter of 11% that exceeded that of Wells Fargo.

The savior of Wells Fargo during this time has been its control of expenses. The bank didn't go overboard during the early 2000s as did many other of its competitors in terms of letting expenses get out-of-hand, and this has been its saving grace.

Still, the performance of the bank indicates that it is losing its former sustainable competitive advantage as its ROE slides toward the bank's cost of capital of about 10%.

This seems to be the fundamental problem of the whole banking industry, and Wells Fargo is just showing its mortality.

But, the bank is headed in the wrong direction. No major bank is doing that well in terms of ROE, but Wells Fargo's is falling, while most of the other larger institutions' ROEs are going up.

Unfortunately, the past corporate culture hangs over the expected performance of Wells Fargo. Things must change, but there isn't much indication that the changes are dramatic enough.

The new management team still seems to carry with it a part of the "old" culture.

As a consequence, Wells Fargo's earnings performance doesn't look likely to improve in the near future. The bank's seems likely to continue to drop toward 10% and possibly even lower.

Yes, the banking environment may change with higher interest rates and some serious changes in regulation, but Wells Fargo doesn't look like it will benefit from these factors as much as other large banks will.

For starters, the net interest margin of Wells Fargo won't rise as rapidly as other banks because of its heavy reliance on mortgages that are connected to longer-maturity loans. And the banking regulations following the Great Recession were aimed at the banks that did more exotic things, something that Wells Fargo didn't do.

Furthermore, the whole banking industry faces economic conditions that will keep it from posting the returns achieved in the past.

Rates of return on shareholder's equity for the larger banks before the Great Recession could be expected to be about or in excess of 15% and could be expected to be produced year after year.

That period is over.

The environment for banking and finance has changed. Banks will likely earn closer to 10% over time, and competition from other banks as well as non-banks will become quite fierce, keeping ROEs at around the cost of bank capital.

This will dominate the banking scene over the next five to seven years, and there will be a lot of restructuring.

Within this environment, Wells Fargo is behind its rivals that have had to move more swiftly, and it is playing catch-up. Wells Fargo's management doesn't seem to quite get this.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

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